The EMC-owned VMware made its own move just two weeks after replacing founder and CEO Diane Greene with Paul Maritz, a former Microsoft executive. Greene had long denied that VMware would be forced to lower its prices.

"If the hypervisor is already commoditised and most of your competitors have a free version, then Paul Maritz did the right thing," says Laura DiDio, a Yankee Group analyst. "You saw how fast he moved. Diane Greene wasn't out of there two weeks."

VMware denies that competition from Microsoft had anything to do with the decision to make ESXi free.

"We're focusing our efforts on the 20-plus products we sell on top of the hypervisor. This is a continuation for us of a long-term strategy," says VMware product marketing manager John Gilmartin.

Gilmartin points to February 2006, when VMware made a similar move, offering its first free hypervisor.

VMware already offers a free hypervisor?

Yes, the VMware Server , which is basically a beginner's kit for VMware's virtualisation technology, has been available at no charge for more than two years.

So what's new?

VMware is now giving away ESXi, the "bare-metal" hypervisor that installs directly onto the server hardware. The VMware Server, on the other hand, is installed as an application on top of the operating system. ESXi previously cost US$495.

Is the VMware Server now obsolete?

Not quite, but there are now fewer reasons to use it. Some hardware devices might work with VMware Server but not ESXi, Gilmartin says. New servers have support for virtualisation built into the chip, but some older platforms may not work with ESXi. VMware Server, since it's not running directly on the server hardware, will be compatible with a greater range of systems. So calling VMware Server obsolete may be too strong a statement, but "in terms of the pure hypervisor, clearly ESXi is more appealing," Forrester analyst Frank Gillett says.

Who should use the free version of ESXi?

The free ESXi is good in limited-use cases, such as consolidating two physical servers into one, Gillett says. You might also use the free hypervisor on an aging server that you plan to upgrade, just to make it easier to move the workload from one box to another when you do replace that server.